NBN Co drops CVC pricing by 12 percent

Retail service providers will be delighted with NBN Co’s decision to reduce its Connectivity Virtual Circuit, CVC, charge by twelve percent.

In the earlier part of this year, NBN stated its plan to lower the monthly/Mbps fees that were charged to retail service providers, RSPs, to transport data over the network from $20 down to $17.50 monthly/Mbps.

Today, the company said that it has made the decision to push forward with its planned 12.5 percent reduction – this after going through quite a few months of industry consultation involving various pricing models.

The new CVC pricing will be implemented effective February 1, 2015.

Increased data consumption on the network made the reduction in CVC pricing reasonable according to a spokesperson from Telstra.

He said that further refinement of NBN Co’s pricing is necessary to give the assurance that the per Mbps average CVC charge will decrease as network demand grows. He said it will also make the future pricing path more transparent.

Optus also announced that they welcomed the news.

An NBN Co spokesperson said they anticipate more consultation with industry to better plan CVC charges to become more reflective of the long-term costs of supply in the future.

To address the concerns that were raised by retail service providers on CVC and AVC (Access Virtual Circuit) charges being too high, the Australian Competition and Consumer Commission, ACCC, has scrutinised NBN Co’s pricing for their services and has proposed a modified set of rules for the company to follow in order to allow close monitoring of how competition builds up over the National Broadband Network.

As it introduced its new set of record-keeping rules last August, the ACCC said that the imbalance between access and capacity charges that may result from NBN Co’s pricing decisions, and the possibility of distorted market outcomes plus the inefficient utilisation or investment in telecommunications infrastructure were some of the concerns raised by access seekers.

Moving forward, NBN Co will be required to save and provide data which includes the number of FTTP-operating AVC services in totality, and wireless and interim satellite access services. This would allow the ACCC to monitor the evolution of competition, as well as the take-up trends.

It would also help ACCC follow the CVC pricing issue and to determine whether or not there were hindrances to the retail service providers’ sufficient CVC access for efficient use of the NBN.